HOA Legi-Slate

As discussed in this post, current law requires a seller, on the request of the buyer, to disclose the association's governing and financial documents listed in the most recent available version of the Colorado Real Estate Commission's sales contract. Sellers may do this by providing the required documents themselves (whether they deliver personally or through their real estate agent) or by authorizing their association to provide them to the buyer. (Although the statute speaks only to sellers authorizing their associations to disclose the documents, practically speaking, it is likely that these requests may come from sellers' real estate agents.) Chances are sellers within your community will be - or already have begun - authorizing your association to disclose these documents to the buyer. Does your association have a system in place to honor these requests efficiently and in a manner that protects association interests?

What types of procedures will work best will vary from association to association, depending on such factors as the association's size and whether or not it employs a professional manager. Regardless of the details, we recommend that (although not one of the required responsible governance policies and procedures) associations have a written procedure, outlining the necessary steps a seller must follow to authorize the release of association documents to a third party.

Factors to consider:

• Does the authorization need to be in writing? We recommend that an association require the authorization be in writing to avoid claims that the association received a request that it did not follow through on, as well as to protect the association in the event an inappropriate third party receives the documents. A written authorization also has the advantage of allowing the seller to provide all necessary information in one place, such as what documents are being requested and who they need to be delivered to. (These factors are discussed below in further detail.)
• Who receives the authorization, whether written or verbal? Should this be the association president or secretary in a self-managed association? The manager in a professionally managed association? Whoever the designated individual, he or she should have an understanding of what is required by the statute and the association's procedure for delivering the documents.
• If written, must the seller use a particular form? Associations whose required policy and procedure addressing owner inspection and copying of association records includes a form for owners to fill out when making requests for the documents could use this form. Sellers could specify on the form that the request is being made in relation to the sale of a unit, which would help the association to respond accordingly. Sellers could also be required to specifically list out the documents required by the latest Colorado Commission of Real Estate contract, saving associations from the responsibility of having to determine what documents the contract lists.
• If written, how long will the authorization be kept as an association record? We recommend that these written requests, to be safe, be kept at least a year after the unit is closed on successfully in case the need arises to defend against any claims that the association did not respond to a request when it never received one.
• Will the association require any additional documentation to protect itself before releasing documents to a third party, such as a copy of the signed real estate contract? This added protection may make an association more comfortable with releasing financial documents to a third party.
• Associations may charge actual costs for providing copies of the documents. How will this money be collected? Will the association request a deposit or payment in full before making the copies? What amount will be charged?
• How much time does the association have to comply with a request for the documents? The statute does not specify a time frame to fulfill these requests. However, it makes sense that an association must respond within a reasonable time. CCIOA specifies that association records must be kept reasonably available to owners, defining "reasonably available" as available on notice of 5 business days or at the next regularly scheduled meeting if occurring within 30 days after the request. Depending on any contractual deadlines, 5 to 10 business days would most likely be reasonable.
• How will the association handle last-minute emergency requests from the seller? In some cases, a seller may neglect to notify the association within a reasonable time frame that the documents need to be delivered. In such cases, an association may be able to justify charging more for complying with the request as its actual cost may rise due to fulfilling the request within an unreasonable time frame.
• How will the documents be delivered? An association should have the seller specify to whom the documents are to be delivered and preferred method of delivery, along with the necessary information to make the delivery (e.g. email address, physical address, fax number.) Again, a written form can be used to collect this information from the seller.

An association should consider the above questions to fashion a procedure that will work best for the individual association. By putting a procedure in place, an association ensures that authorizations to provide documents to a buyer are handled uniformly, smoothly, and with the association's interests in mind.